Fuel price cut not enough: Experts

NEW MOVE: UPA government is in damage control mode and announced a cut in fuel prices.

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New Delhi: With rising prices becoming a major worry especially at election time, the UPA has swung into action and in damage control mode announced a cut in fuel prices effective from midnight.

But experts believe, while the cut in diesel prices could arrest inflation it may not be enough.

You will pay Rs 2 less for every litre of petrol you buy and Re 1 less for each litre of diesel. That's because the Government has cut prices in petro products.

Prime Minister Manmohan Singh said, “I think in the next couple of weeks you will see positive results of the action that we have taken.”

The cut in diesel is being welcomed by economists.

Planning Commission Principal Adviser Pronab Sen said, “Diesel does have a strong cost pushing element.”

Experts say petrol is essentially a consumer product and a cut in petrol prices could give the consumer more money to spend and that could be counterproductive in fighting inflation.

“Which means that you are releasing liquidity in the hands of the consumer who can then promptly directed to other products,” Sen added.

So what has been spiking prices up?

The price of food articles are up by almost twenty percent as are prices of manufactured goods. Petro products have become dearer in the last year.

India's foreign reserves are also rising and all these adds to inflation.

But the Government's decision may not have been inspired by economics only. The Government of the common man had to do something to show it thinks of the common man - especially at the time of crucial state elections.